Alliance Boots Boots Alliance Annual Report 2010/11 Annual For more information www.allianceboots.com HEALTH + Registered offi ce Helping people look Alliance Boots GmbH and feel their best Baarerstrasse 94 CH-6300 Zug Switzerland Contact [email protected] Alliance Boots Annual Report 2010/11 Overview Our performance in 2010/11 Glossary of key terms (for the year ended 31 March 2011) Constant currency Like for like revenue Trading profit Exchange rates applicable for the financial Like for like revenue on a constant currency basis Profit from operations before amortisation of information for the year ended 31 March 2010. compared to the comparable period in the customer relationships and brands, exceptional previous year. items and share of post tax earnings of EBITDA associates and joint ventures. Trading profit before underlying depreciation Net borrowings Revenue EBITDA Trading profit and amortisation. Cash and cash equivalents, restricted cash, Underlying depreciation and amortisation derivative financial instruments and borrowings Depreciation and amortisation adjusted to Exceptional items net of unamortised prepaid financing fees. exclude amortisation of customer relationships Items classified by Alliance Boots as exceptional and brands and depreciation and amortisation in nature. These are not regarded as forming Net finance costs within exceptional items. +15.1% +10 . 8 % +14 . 2 % part of the underlying trading activities of the Finance costs net of finance income. Group and so merit separate presentation to Underlying net finance costs allow stakeholders to understand the elements Restricted cash Net finance costs adjusted to exclude of financial performance and assess trends in Cash which is restricted for specific purposes exceptional items and timing differences within financial performance. and so is not available for the use of the Group net finance costs. £20.2bn £1,300m £1,051m in its day to day operations. £23.3 billion including share of associates £1,442 million including share of associates £1,164 million including share of associates IAS 39 timing differences Underlying profit Derivative financial instruments are used to Share of underlying post tax earnings Profit for the year before amortisation of and joint ventures and joint ventures and joint ventures hedge interest rate and currency exposures. of associates and joint ventures customer relationships and brands, exceptional IAS 39 dictates whether changes in the fair value Share of post tax earnings of associates and items, timing differences within net finance of these instruments can be matched in the joint ventures before amortisation of customer costs and related tax. income statement by changes in the fair value of relationships and brands, exceptional items, F 1&%#,#02#"$0-+-.#02'-,1ylAnkt+'**'-, the item being hedged. Where they cannot be timing differences within net finance costs Underlying tax charge/credit F#2 -00-5',%10#"3!#" 7ypoq+'**'-, matched, or do not fully match, the unmatched and related tax. Tax charge/credit adjusted to exclude tax on amount represents a timing difference that will amortisation of customer relationships and F 2#.!&,%#',',2#0,2'-,*#6.,1'-,-$.&0+!#32'!*5&-*#1*',%B reverse over the life of the financial instruments. Timing differences within net brands, exceptional items, timing differences – Controlling interest in Hedef Alliance acquired in July (Turkey, Egypt) finance costs within net finance costs and exceptional tax. Interest cover IAS 39 timing differences and the unwind of – ANZAG majority ownership acquired in December (Germany, Romania, Lithuania) Trading profit divided by underlying net the discount on obligations to non controlling F ,2#0,2'-,*'12'-,-$.0-"3!2 0,"1!!#*#02',% finance costs. interests. Trading margin 1 EBITDA comprises trading profit before underlying Trading profit expressed as a percentage £million depreciation and amortisation. of revenue. Revenue 20,218 2 Underlying depreciation and amortisation excludes amortisation of customer relationships and brands and EBITDA1 1,300 depreciation and amortisation within exceptional items. 2 3 Trading profit comprises profit from operations before Underlying depreciation and amortisation (249) amortisation of customer relationships and brands, 3 exceptional items and share of post tax earnings of Trading profit 1,051 associates and joint ventures. Associates and joint ventures – share of underlying post tax earnings4 74 4 Associates and joint ventures – share of underlying post tax earnings comprises share of post tax earnings of associates 5 Alliance Boots GmbH This Report is printed on Heaven 42 paper that has Underlying net finance costs (381) and joint ventures before amortisation of customer Copyright and trade mark notices been independently certified on behalf of the Forest relationships and brands, exceptional items, timing 6 Underlying tax charge (137) differences within net finance costs and related tax. All rights reserved Stewardship Council (FSC). 7 5 Underlying net finance costs comprise net finance costs © Copyright 2011 Alliance UniChem IP Limited Underlying profit 607 adjusted to exclude exceptional items and timing Printed at St Ives Westerham Press Ltd, ISO9001, differences within net finance costs. BOOTS, SOLTAN, SOLEI SP, No7, 17, BOOTS ISO14001, FSC certified and CarbonNeutral® 6 Underlying tax charge excludes tax on amortisation of PHARMACEUTICALS, PROTECT & PERFECT INTENSE 0#!-,!'*'2'-,-$3,"#0*7',%.0-i22-12232-07.0-i2$-02&#7#0'11#2-32 #*-5B customer relationships and brands, exceptional items, timing differences within net finance costs and exceptional tax. BEAUTY SERUM, No7 PROTECT & PERFECT INTENSE £million 7 Underlying profit excludes amortisation of customer DAY CREAM, BOTANICS, BOOTS LABORATORIES, relationships and brands, exceptional items, timing 7 SERUM7, YOUR LOCAL BOOTS PHARMACY, BOOTS Underlying profit 607 differences within net finance costs and related tax. OPTICIANS, BOOTSWEBMD, BOOTS ADVANTAGE 8 Net exceptional items before tax mainly comprised a net CARD, TREAT STREET, BOOTS EMPLOYEE WELLBEING Amortisation of customer relationships and brands (114) gain in relation to the closure of a number of defined SERVICE, BOOTS IRELAND, BOOTS THAILAND, BOOTS Net exceptional items before tax8 36 benefit pension schemes offset by costs in relation to a restructuring programme in the UK part of the Health & APOTEK and BOOTS APOTHEEK are trade marks owned by The Boots Company PLC. Timing differences within net finance costs (29) Beauty Division and the second phase of the restructuring Designed and produced by programme in the Pharmaceutical Wholesale Division. CONRAN DESIGN GROUP Tax credit on items not in underlying profit 40 9 Exceptional tax credit related to the net reduction in ALMUS, ALVITA, ALLOGA, ALLIANCE HEALTHCARE 9 deferred tax assets and liabilities resulting from the two and ALLIANCE HEALTHCARE (DISTRIBUTION) are Exceptional tax credit 72 percentage point reduction in the rate of UK corporation Registered office trade marks owned by Alliance UniChem IP Limited. Profit from continuing operations 612 tax applicable from April 2011. Alliance Boots GmbH Baarerstrasse 94 ALPHEGA PHARMACY is a trade mark owned by Profit from discontinued operations 3 CH-6300 Zug Alliance Healthcare France Société Anonyme. Profit for the year 615 Switzerland VIVESCO and VIVESCO APOTHEKEN are owned by Contact Andreae-Noris Zahn AG [email protected] Website www.allianceboots.com Alliance Boots | Annual Report 2010/11 113 Overview Business review Governance Consolidated Additional information financial statements We are a leading international, pharmacy-led health and beauty group. Our focus is on helping people look and feel their best. HEALTH + What’s inside Overview 00 Our performance in 2010/11 02 Our Group at a glance 03 Our mission, purpose and values 04 Our business activities 06 Executive Chairman’s statement 10 Group strategy and objectives 14 Our markets and business environment Business review 18 Overview 22 Health & Beauty Division 28 Pharmaceutical Wholesale Division 34 Other activities 36 Financial review 42 Performance measures 43 Financial record 44 Risk management 46 Our people 47 Corporate social responsibility Governance 50 Board of Directors 52 Board report on corporate governance 54 Board report on remuneration 57 Audit committee report Consolidated fi nancial statements 58 Directors’ responsibilities statement 59 Statutory auditor’s report 60 Group income statement 60 Group statement of comprehensive income 61 Group statement of fi nancial position 62 Group statement of changes in equity 63 Group statement of cash fl ows 64 Notes to the consolidated fi nancial statements Additional information 110 Principal businesses, associates and joint ventures 113 Glossary of key terms Alliance Boots | Annual Report 2010/11 01 Overview Our Group at a glance Alliance Boots is a leading international, pharmacy-led health and beauty group delivering a range of products and services to customers. Working in close partnership with manufacturers and pharmacists, we are committed to improving health in the local communities we serve and helping our customers and patients to look and feel their best. Our focus is on growing our two core business activities: F&0+!7Q*#"&#*2&," #3270#2'*',% F&0+!#32'!*5&-*#1*',%,""'120' 32'-, Over 115,500* employees 0#1#,!#',-4#0mp?!-3,20'#1 Dispensing more than 250 million* items each year 115,500+ 25+ 250m+ Operating more than 3,280* Delivering to over 160,000* Operating over 370* health & beauty retail stores, pharmacies,